Benchmarks end lacklustre penultimate session of F&O expiry in red

Tuesday turned out to be a lacklustre day of trade for the stock markets in India, as the benchmark equity indices failed to hold on to the initial gains and settled the session slightly in the red in absence of any positive trigger. Frontline gauges swung between gains and losses, but in tight band, for day the investors preferred cashing out their profits ahead of the Christmas holiday followed by expiry of December derivative contracts on Thursday. Though, markets made a positive opening as traders remained optimist in early deals after the Commerce and Industry Minister Anand Sharma highlighted that India will achieve the modest export target of $325 billion for the current fiscal but to enhance it substantially, the country needs to boost its manufacturing capability. Some support also came in from report that foreign institutional investors (FIIs) bought shares worth a net Rs 135.42 crore on December 2013 23, as per provisional data from the stock exchanges.

Global cues too remained supportive with the US markets continuing their up-move in the new week taking the Dow and the S&P 500 to new record highs, backed by continued optimism about the outlook for the US economy following IMF’s positive comments. Moreover, all the Asian equity indices, barring Taiwan Weighted, shut shop in the green terrain. European markets too made a positive opening with CAC and FTSE trading higher in early deals on Tuesday.

Back home, the rate sensitive banking sector remained under pressure as the RBI Governor Raghuram Rajan has said that fighting rising prices will continue to be its priority and a call on raising interest rates will be taken after factoring in more data. However, he said that the Reserve Bank will wait for next set of data on inflation and industrial growth before taking a call on interest rates. Meanwhile, software and technology counters too remained under selling pressure as Indian rupee continued to trade strong for yet another day the rupee was trading at 61.87 at the time of equity markets closing versus its close of 61.95 on Monday.

Sentiments dampened after Vedanta Group companies like, Sesa Sterlite, and Hindustan Zinc edged lower as the CBI registered a preliminary enquiry against Vedanta Group chairman Anil Agarwal and unknown officials in connection with alleged irregularities in the disinvestment of Hindustan Zinc. However, the losses remained capped as some buying was witnessed in realty space after Credit disbursement to the sector rose to 19.6% compared to last year, with 21% increase in disbursement to real estate companies and 19% increase in mortgages.

The NSE’s 50-share broadly followed index Nifty dipped by around twenty points to end below its psychological 6,300 level, while Bombay Stock Exchange’s sensitive Index -- Sensex declined by around seventy points to end above the psychological 21,100 mark.

Broader markets, however, outperformed benchmarks and ended the session with a gain of around a percentage point. Moreover, the market breadth remained in favour of advances, as there were 1,444 shares on the gaining side against 1,034 shares on the losing side, while 158 shares remained unchanged.

Finally, the BSE Sensex lost 68.32 points or 0.32%, to settle at 21032.71, while the CNX Nifty declined by 16.10 points or 0.26% to settle at 6,268.40.

The BSE Sensex touched a high and a low of 21156.92 and 21010.65, respectively. The BSE Mid cap index was up by 0.53%, while the Small cap index gained 1.04%.

The top gainers on the Sensex were BHEL up 1.92%, Bajaj Auto up 1.91%, Dr Reddys Lab up 0.99%, L&T up 0.66%, and NTPC up 0.55%, on the flip side Tata Power down 3.20%, SSLT down 2.31%, Wipro down 2.10%, Sun Pharma down 1.73%, and Hero MotoCorp down by 1.39%,were the top losers on the index.

On the BSE Sectoral front, Capital Goods up by 0.66%, Consumer Durables up by 0.38%, Realty up by 0.08%, and Healthcare up by 0.07%, were the only gainers, while Metal down by 1.09%, Bankex down by 0.43%, Oil & Gas down by 0.23%, Power down by 0.22%, and FMCG down by 0.17%, were the top losers on the sectoral front.

Meanwhile, in order to increase the insurance distribution network and to avoid mis-selling of insurance products in the country, Finance Ministry has directed public sector banks to act as insurance brokers by floating a subsidiary from January 15. 

Meanwhile, as per the RBI guidelines, banks with large bad loans, low capital and losses may not qualify to start insurance broking firms. The RBI has noted that banks with more than 3% of non-performing loans cannot get into selling multiple products, eliminating PSU banks such as Central Bank of India, Allahabad Bank and United Bank of India. Currently, banks are allowed to sell products of one life, one nonlife and one health insurance company. Furthermore, earlier in August, the insurance regulator had also released the final guidelines on bancassurance under which banks must not have more than a 50% exposure to any one client. It may also not be acceptable for foreign joint venture partners of life insurance companies such as PNB Metlife Insurance and SBI-IAG General Insurance, which have paid hefty premium for exclusive bank distribution network.

On the other hand, banks are not keen to acts as an insurance broker as the banking industry is of the view that under this model, banks are likely to see a substantial decrease in their premium collections. As corporate agents, banks can earn up to 35 percent of the first-year premium but as brokers they would be entitled to a maximum of 30 percent. Further, banks also fear that floating a subsidiary to sell insurance products and ending the exclusive arrangements with insurance companies will be difficult.

The CNX Nifty touched a high and low of 6,301.50 and 6,262.00 respectively.

The top gainers on the Nifty were Ranbaxy Laboratories up by 2.75%, Bajaj Auto up by 2.24%, BHEL up by 2.19%, UltraTech Cement up by 1.70%, and Punjab National Bank up by 1.69%, On the other hand, Tata Power Company down by 3.14%, SSLT down by 2.28%, Wipro down by 2.16%, Bank of Baroda down by 1.76%, and IndusInd Bank down by 1.65%, were the top losers.

The European markets were trading in green, France's CAC 40 was up by 0.25%, Germany's DAX was up by 0.94%, and United Kingdom's FTSE 100 was up by 0.43%.

The Asian markets barring Taiwan Weighted concluded Tuesday’s trade in green with Japanese shares touching a six-year high, helped by a weaker yen and propelled steadily upward as investors looked to developed Asia for returns, indicating growing faith in Japan’s reform agenda. China’s interbank money rates rose yesterday despite the central bank’s injection of 300 billion yuan ($49.1 billion) last week because banks need to amass cash to meet year-end regulatory requirement. China’s local government debt may have doubled in the previous two years to an alarming level of nearly 20 trillion yuan ($3.3 trillion) by the end of 2012. The combined debt of central and local governments totaled nearly 28 trillion yuan, or 53% of last year’s gross domestic product.

Besides, home prices in the largest cities may peak in the first quarter and drop at the end of next year. The price of homes in large Chinese cities continued to rise from a year earlier in November. New home prices increased month on month in 66 of the 70 major cities monitored by the government last month, up from 65 in October. In Hong Kong, overall consumer prices rose 4.3% year-on-year in November, matching October’s figure. Netting out the effects of the Government’s one-off relief measures, the underlying inflation rate was 4%, also matching October’s figure.